It’s Day 1 for online grocery in the Nordics
The first Ada Insights Live event gathered Finnish online grocery people together for a day of presentations and discussions. It was an excellent time to remember that despite years of work in the online grocery industry, it is still very much Day 1 for the nascent channel.
The day presented an excellent opportunity to remind everyone how slow the waves of change are in the grocery industry. The two previous examples of new format growth are the emergence of the self-service concept (small supermarkets) and the rise of big stores (hypermarkets and big supermarkets).
The rise of the self-service stores
The self-service concept was first introduced in the United States in the early 1900s, but it became more widely adopted before World War II. In Finland, the self-service concept was introduced in the late 1940s. However, the idea started to emerge as the dominant concept in the 1960s and had its peak decade in the 1970s.
Interestingly, a new concept was introduced simultaneously as the self-service concept had its golden era. Introduced to the world in France in 1963, the first hypermarket was opened in Finland in 1970.
Hypermarket emerges
As the self-service concept dominated food buying, hypermarkets gradually took share as a more efficient form of grocery retailing. However, the big supermarkets and hypermarkets didn’t conquer the grocery retail market immediately.
It took almost two decades for the concept to become adopted more widely. The self-service concept remained popular and widely adopted throughout the 70s and early 1980s. In 1990 the combined market share of big supermarkets and hypermarkets was 19%. However, 10 Years later, that same combined market share had reached 52%.
Thus, one can say that it took 20 years for the big store concepts to reach 19% of the market and only ten years to almost triple that market share.
Online emerges to challenge the efficiency of big stores
With this understanding as a backdrop, it is good to remember that online grocery retailing in all Nordic countries is still very young. In most countries, they have been significant players and developments in the market for only a decade. As a comparison, the UK has had Tesco as the market leader and driver of market development for more than 25 years already.
UK online grocery reached 5% in October 2016, almost 20 years after the introduction of Tesco’s online service.
Therefore, in Nordic countries, it is reasonable to expect that online grocery retailing will become one of the biggest channels of groceries. Still, it will take more time than initially anticipated.
The online grocery market will probably become bigger than is generally thought, but it will also take longer than expected.
After all, grocery retailing has, over time, evolved into concepts that provide
wider assortments
more considerable efficiencies and thus lower prices
more self-service.
Self-service concepts and, subsequently, hypermarkets did just that. Online is better in all aspects, so it is reasonable to believe that online will eventually become big.